European Open: German IFO expected to slump, EUR/GBP in focus

Asian Indices:

• Australia's ASX 200 index rose by 27.2 points (0.37%) and currently trades at 7,414.30
• Japan's Nikkei 225 index has fallen by -44.27 points (-0.16%) and currently trades at 28,066.12
• Hong Kong's Hang Seng index has fallen by -355.7 points (-1.62%) and currently trades at 21,590.25
• China's A50 Index has fallen by -133 points (-0.96%) and currently trades at 13,655.97

UK and Europe:

• UK's FTSE 100 futures are currently down -4 points (-0.05%), the cash market is currently estimated to open at 7,463.38
• Euro STOXX 50 futures are currently up 8 points (0.21%), the cash market is currently estimated to open at 3,871.39
• Germany's DAX futures are currently up 31 points (0.22%), the cash market is currently estimated to open at 14,304.79

US Futures:

• DJI futures are currently up 52 points (0.15%)
• S&P 500 futures are currently up 1.25 points (0.01%)
• Nasdaq 100 futures are currently up 5.25 points (0.12%)

It was a mixed performance from Asian equity marker heading into the weekend. The ASX 200 rallied for a second consecutive week thanks to a strong performance from mining stocks. The Hang Seng fell to a 3-daylow after its strong rebound lost steam just beneath the March 2020 lows. Futures markets are also mixed with European markets opening higher, S&P and Nasdaq diverging and the FTSE pointing lower.

With no major news overnight then traders are likely squaring up their positions ahead of the weekend. Joe Biden is set to arrive in Poland today, where he’s expected to access the response to refugees in Poland.

FTSE 350: Market Internals

FTSE 350: 4186.1 (0.09%) 24 March 2022

• 111 (31.62%) stocks advanced and 229 (65.24%) declined
• 6 stocks rose to a new 52-week high, 2 fell to new lows
• 35.61% of stocks closed above their 200-day average
• 42.17% of stocks closed above their 50-day average
• 15.67% of stocks closed above their 20-day average

Outperformers:

• + 14.6% - HomeServe PLC (HSV.L)
• + 9.85% - Bridgepoint Group PLC (BPTB.L)
• + 5.85% - Ferrexpo PLC (FXPO.L)

Underperformers:

• -6.54% - Weir Group PLC (WEIR.L)
• -4.19% - Softcat PLC (SCTS.L)
• -3.98% - Jtc PLC (JTC.L)

Last month’s IFO report was likely too optimistic

German IFO is scheduled for 09:00, although the apparent divergence between the IFO and ZEW reports should be noted. The previous IFO report (which was released just before Russia invaded Ukraine) stated that sentiment “in the German economy has improved appreciably” as saw sentiment, current conditions and expectations all rise notably. Yet the ZEW report released less than two weeks ago (after the invasion) saw the expectations component nosedive to its most pessimistic level since the height of the pandemic, as investors feel a recession is inevitable due to the war in Ukraine. It’s likely the IFO will track it lower today.

EUR/GBP drifts to a key resistance zone

An impulsive move lower from the March high has been within a corrective phase since Wednesday and drifted higher in 3-wave. Yet several levels of resistance reside around 0.8360 which includes a 100% Fibonacci expansion, 38.2% retracement and 50/200-bar eMA’s on the four-hour chart. We’re therefore looking for prices to top out around current levels and momentum revert to its bearish trend which began last Friday.

JPY is the strongest major

Although that’s not to say it is a sign of strength as the yen is simply retracing against heavy losses sustained recently. Iron ore prices continued to rip higher in China on supply shortage concerns due to Covid disruptions. This has provided further support for the Australian dollar which is enjoying a broad commodity rally. In fact, the Aussie is the strongest currency this month so far, with ZD a close second and CAD in third place. JPY is by far the weakest of the month, currently down -5.2%.

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